Till Debt Do You Part: Owner-ops hit hardest in cash crunch

TORONTO — As the economy took a tumble and the price of diesel continued to climb, Fred Cover found his receivables list getting progressively longer.

The Drumbo, Ont., owner-operator has been on his own for a decade hauling loads for 19 different outfits, including load brokers. Now he figures only about four or five of his customers cut him cheques on time.

There have always been companies around who aren’t swift when it comes to paying, but because so many are hanging on by their fingertips in these troubling times, Cover says there are many more in the market than there used to be.

Without consistent cash flow, his set of super-B’s are up for sale and he’s leasing his trucking service to a van operation. He’s been given a fleet fuel card, so the veteran of 35 years can at least deliver the loads, while waiting — and hoping — for his cheques to come in.

With owner-operators, the payment schedule set out in a contract isn’t protected by labor laws, so a violation of the contract — like late payments –would have to be dealt with through the power of faith, a collection agency, or small claims court. You might eventually be paid, but if it comes to that, the relationship will likely be done for.

And as blowback from the U.S. financial crisis heads north, available credit is freezing, making it more difficult for some operators to keep things afloat until payment flows in (be sure to check out this week’s online feature, ‘Into the Wild,’ for a detailed look at how the Wall St. collapse down south affects Canuck truckers).

If your carrier’s customers look in rough shape, there’s a
good chance payment could roll in a lot slower.

Scott Taylor of TFS Group, a tax and money management consulting firm for owner-ops, offers little solace for truckers in this predicament. "If you have some equity in a truck asset that equity may not be there in the not-too-distant future depending on how this thing all plays out.

"So, that may be cause for your next review for a line of credit to disappear," he says. The truth is, you’re limited in what you can do, because if you’re over-extended, no one has money right now to pay it off."

His advice? "I’d say get your ship in order — get your personal stuff paid for — so you have room to deal with the tidal wave of bad times as they come in."

He also says that truckers would be wise to act now if they planned to visit banks for additional capital in the next six months.

"A few months from now, restrictions or ­qualifications to get loans could be even stricter than they are now."

At the same time, keep an eye out for the writing on the wall when making deliveries.

"If the customers you’re servicing start looking like they won’t be able to pay, then your carrier might not have the money to pay you either," one western fleet owner warns.

Working for more diverse carriers could also provide some protection. Hauling for a carrier who doesn’t have all their "eggs in one basket" will help protect the fleet if the bottom falls out from a given sector.

If a carrier you’re hauling for closes shop, being upfront with creditors will help keep the truck in your possession while you look to replace the lost earnings.

"It’s in the creditor’s best interest to help them through the ­situation," says Dave Brown, sales and marketing, Daimler Trucks Canada. "Nobody is anxious to go out and seize trucks. Equity in trucks is hard to come by and when a truck is seized it leads to a loss for all involved."